US Stocks Add To Gains; Financials Lead The Way

AnnelenaLobb

Stocks jumped Friday - with the Dow Jones Industrial Average adding more than 200 points - as investors bet that news of further decay in the jobs market would hasten Congress's passage of a stimulus package.

Bank stocks paced the gains with the spotlight remaining on Washington and as traders gain confidence that the stimulus bill could soon pass the Senate. The Financial Select Sector SPDR Fund, an exchange-traded fund, gained 5.4%, to 9.60. Since the failure of Lehman Brothers in September, investors have often taken their cues from the direction of banks on the stock market, because the solvency of the banking system is of paramount importance to the economy.

Friday, the market was also given another shot in the arm as Bank of America Chief Executive Ken Lewis said his bank will not need any more government money, speaking on CNBC. Shares of the company were recently up 27%, recovering from a downward spiral in recent days as investors feared the bank would be nationalized.

"Nobody wants to be short this market with the president coming out with his plan Monday," said Frank Ingarra, co-portfolio manager at Hennessy Funds.

The Dow Jones Industrial Average tacked on 213 points, or 2.6%, to around 8275. The S&P 500 and the Nasdaq Composite Index rose around 2.8% each.

Treasury Secretary Timothy Geithner is expected to disclose the administration's plans to address still-ailing financial institutions Monday. The White House's financial-rescue plan is shaping up to include capital injections with tougher terms than the first round and an expansion of an existing Federal Reserve lending facility that could potentially buy up toxic assets clogging the system, The Wall Street Journal reported.

Depending on what the plan entails, the market could sell off Monday "after the details are out," said Robert Pavlik, chief market strategist at Banyan Partners. "What else can they do if this doesn't work?"

"We need the financials to firm," said Jeffrey Frankel, president of Stuart Frankel & Co. "Once you get rid of that fear factor, investors feel more confident."

Friday's market uptick comes despite another round of dire economic data. Nonfarm payrolls fell by 598,000 in January, the Labor Department said, the most since December 1974, and the jobless rate jumped to 7.6%, highest since September 1992. Since the recession began in December 2007, 3.6 million jobs have been lost. Half of those cuts occurred in the last three months.

But a terrible report was largely expected, and the data "weren't as bad as the whisper numbers," said Warren Meyers, managing partner at W.J. Dowd Inc.

Numerous big companies have said they are planning extensive layoffs as the recession lurches into a second year. Claims for jobless benefits have remained at the highest levels in more than 20 years and spending by consumers has been reined in, a sign that many are building up their savings in the face of uncertain employment prospects and still-falling home prices.

A possible Senate vote on the Obama administration's stimulus proposal could come as early as Friday. The measure has been the subject of intense wrangling among lawmakers and its ultimate size and shape remains very much in flux. President Barack Obama decried as "inexcusable and irresponsible" the delay in passing the $900-billion-plus plan.

"Maybe this type of number will push those in Washington to come to some type of agreement and move forward with this plan today," said Dan Cook, strategist with IG Markets. "If the Senate does not make a move forward today, I would compare that to doctors standing around a cardiac arrest victim and arguing over whether they should start mouth to mouth or use the defibrillator."

Hopes for the stimulus package, which will likely include investment in heavy construction and infrastructure, helped the commodities and industrial sectors. Caterpillar rose 6.7% to $33.71. United States Steel added 3.30, or 10%, to 34.73; steel-and-grain shipper Genco Shipping & Trading added 10% to $20.56.

Oil prices recently fell by almost $1 to $40.45. Shares of large oil companies including ConocoPhillips and ExxonMobil managed to stay in the black.

Treasury prices fell across the curve. Losses were steepest in the benchmark 10-year Treasury, which recently lost 12/32 to yield 2.952%. The U.S. dollar bought Y91.77, a gain from late Thursday, and the euro gained against the dollar, buying $1.2862.

Intraday Data provided by SIX Financial Information and subject to terms of use. Historical and current end-of-day data provided by SIX Financial Information. All quotes are in local exchange time. Real-time last sale data for U.S. stock quotes reflect trades reported through Nasdaq only. Intraday data delayed at least 15 minutes or per exchange requirements.